With a monthly household income of up to $14,000, purchasing a mass market private condominium is not out of the question; whilst those in the lower income bracket can easily take the HDB BTO route. Thus, amid the plentiful choices that a buyer has, why are Executive Condominiums (ECs) still popular in today’s market?

So far in 2016, there has been good and steady demand for ECs. According to data from the Urban Redevelopment Authority (URA), for the first seven months of 2016, 2,697 EC units were sold by developers. This has already surpassed the 2,550 units sold by developers for the whole of 2015.

Photo: TREASURE CREST

In addition, some of the best-selling projects this year have been ECs. Wandervale and Treasure Crest were two of the most successful EC launches since 2014. Wandervale, the first EC to launch in 2016, sold some 50 per cent or its 534 units on the opening weekend; whilst in July, Treasure Crest sold some 72 percent of its 504 units on the first weekend. Existing EC projects have also been seeing sustained interest from buyers, with developments such as Bellewaters, The Vales and the Terrace seeing a steady stream of buyers even though they are not new launches.

For most EC buyers, the main appeal of ECs is the condominium address and lifestyle but at a cheaper price. ECs are typically priced $750 to $850 per square foot whilst mass market condominiums within the vicinity are likely to be $1,000 to $1,100 per square foot onwards.

After the minimum occupation period of 5 years, the EC unit can be resold on the secondary market to Singaporean or SPR buyers whilst 10 years after completion, the EC unit can also be sold to foreign purchasers. So, depending on the state of the market at the relevant point in time, the EC buyer already enjoy a larger headroom for capital gain as compared to someone who had bought a mass market condominium unit at around the same time as the EC buyer.

Further, for eligible first-time EC buyers, they have the added advantage of using the CPF Housing Grant of $30,000 to help pay for the purchase price. There are no housing grants available for private condominiums.

The second reason is a practical one. EC buyers are owner-occupiers and they are purchasing the unit to start a family or to house a family.

Majority of EC projects are designed to comprise mainly 3 and 4-bedroom units; with the exception of some that may have a small selection of 1 and 2-bedroom units. Comparatively, a mass market condominium may have more numbers of smaller units than larger units as they also target the investor buyers that prefer a lower price quantum.

The third reason is the living space; and size matters when you have to house a family. Treasure Crest EC’s 3-bedroom units are sized 958 to 1,249 square feet whilst its 4-bedroom units are 1,345 square feet. Comparatively, private condominium’s 3-bedroom units may be about 880 to 1,100 square feet and their 4-bedrooms may not exceed 1,300 square feet.

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From 1st April 2016, decoupling will only be allowed under specific situations. These include marriage, divorce, death of an owner, financial hardship, loss of citizenship, and medical grounds. This could have a small impact on the market of potential buyers, who may find a second property less attractive after the ABSD.

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Sellers are letting go of their properties, even if they have to incur seller’s stamp duty. However, they generally wait until the SSD falls to 4% in the fourth year of purchase. Based on the latest revision of the SSD measure, homeowners who purchased their houses on or after Jan 14, 2011 and resold them within four years of the date of purchase are required to pay SSD. The SSD rates vary with the holding period, at 16%, 12%, 8% and 4% within the first, second, third and fourth years from the date of purchase respectively.

Table

Source: URA, The Edge Property

The number of sellers who paid 4% SSD grew from 200 in 2014 to 244 between January and November this year. On the other hand, only 68 sellers let go of their properties within three years of purchase in 2015, when SSD rates were hefty at between 8% and 16% (see table).

There could be several factors behind this. First, sellers might prefer to hold cash or other liquid assets in the current market so they can re-enter the market when property prices bottom.

The number of sellers who paid 4% SSD in 2014 and 2015 had purchased the properties in 2011 and 2012 and most of them netted a profit even after paying the 4% SSD.

Second, sellers who do not wish to hold on to their properties, for financial or other reasons, might do well to offload them now rather than next year, in case prices drop further. Prices of private non-landed homes have fallen an average of 1% a quarter since 3Q2013’s peak. If this trend continues or worsens, sellers might be better off incurring the 4% SSD now instead of waiting another year and risk selling their properties at lower prices as a result of a higher supply in the market.

Third, there are sellers who are forced to let go of their properties because of the soft rental environment and interest rate hikes. These properties might be sold at a loss or within the first three years of purchase. The proportion of unprofitable transactions moves in tandem with the decline in SSD rates, declining from 80% at 16% SSD rate in the first year to 22% at 4% SSD rate in the fourth year and 12% on the fifth year, when SSD is lifted (see chart).

The findings are based on matched URA’s resale and subsale caveats for private non-landed homes as at Nov 24, 2015, with their previous transactions on or after Jan 14, 2011.

Chart

Source: URA, The Edge Property

Investors pressured to offload shoebox and large units

Projects with the highest number of resale transactions in the fourth year of purchase were Parc Rosewood, A Treasure Trove and Ripple Bay, with 19, 11 and 10 resale caveats respectively. Interestingly, these caveats involved mostly shoebox units.

The eagerness to offload shoebox units as soon as SSD fell to 4% in the fourth year could have been motivated by a soft rental market, yield compression and the interest rate hike. In addition, shoebox units in the mass-market continue to face strong competition from HDB flats for tenants. Based on our basket of properties, monthly rents for shoebox units in the mass-market were estimated to have fallen 21%, or more than $500, from $2,552 in 3Q2013 to $2,016 in 3Q2015.

In fact, URA data shows that monthly rents for a 400 to 500 sq ft unit at Parc Rosewood averaged just $1,657 in 3Q2015. Parc Rosewood was completed in 2014. Similar-sized units commanded an average monthly rent of $1,815 in 3Q2014. Over the course of one year, the average rent for shoebox units in the development has fallen 8.7%.

At A Treasure Trove, 58% — or seven of 12 caveats — were for 775 sq ft units, the smallest apartments in the project. Although the project was completed this year, there is evidence of rental decline within the course of just a few months. For example, 700 to 800 sq ft units were let at an average monthly rent of $2,367 in July. Similar units fetched an average monthly rent of $2,230 in October, reflecting a 6% decline over a period of three months.

On a more positive note, all the transactions at Parc Rosewood, A Treasure Trove and Ripple Bay were profitable after accounting for the 4% SSD payable, as the sellers had purchased the properties at attractive prices in 2011.

Larger units are also likely to be the most affected by the interest rate hike and soft rental environment. In dollar terms, Reflections at Keppel Bay accrued the most SSD from Jan 14, 2011, amounting to $1.81 million for seven resale caveats. Four caveats were for units measuring between 1,200 and 2,207 sq ft. The Minton trailed closely with $1.29 million for 18 resale caveats, with an average unit size of 1,159 sq ft.

The highest SSD incurred for a single transaction was for a 3,821 sq ft unit at Four Seasons Park, amounting to $1.14 million in SSD.

At least 18,145 non-landed homes to be freed from SSD in 1H2016

Based on our study, 18,145 non-landed homes will no longer be subject to SSD in 1H2016, as their holding periods cross the four-year mark. Of these, 1,574 units will be located in Core Central Region, 4,164 units in Rest of Central Region and 12,407 units in Outside Central Region. Some of these units could turn out to be value deals, as the owners who are under pressure to sell have weaker bargaining power.

The top three projects with at least 100 shoebox units entering the fifth year of their holding period are Parc Rosewood, Guillemard Edge and Casa Cambio.

*Credit to The Edge Singapore
This article appeared in The Edge Property Pullout, Issue 708 (December 21, 2015) of The Edge Singapore.

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The sixth stage of the Circle Line (CCL6), which will link up Harbourfront and Marina Bay stations, will have three stations: Keppel, Cantonment and Prince Edward.

This will “close the loop” of the line, said the Land Transport Authority (LTA) on Thursday (Oct 29), as it announced the alignment and station locations of the CCL6. The project will be completed by 2025.

It will cost $3.7 billion to build the 4km underground line and stations, and another $2.3 billion to expand the current Kim Chuan depot to stable more trains.

With the CCL6, commuters can enjoy a more direct route to the Central Business District, the Marina Bay Area and Harbourfront.

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Presenting to you, Principal Garden, located at Prince Charles Crescent, surrounded by Good Class Bungalows of the Chatsworth and Bishopsgate Estates.A thoughtfully-designed 99-years leasehold private development that is close proximity to Orchard Road and the Central Business District (CBD). The development will appeal to savvy investors and discerning home buyers who are seeking quality residences.

The 663 residential units, with a total of 4 blocks of 1 Bedroom to 5 Bedrooms project caters all types of apartment types from multi-generation living, families, young couples, singles as well as investors.

All Residential Units only occupied 20% of the Land (266,000 sqft) and the remaining 80% are landscape. Whopping 4X more garden than structure.

HDB and MND have just announced a $20k grant with relatively few restrictions — Proximity Housing Grant (PHG). This will replace the Higher-Tier CPF Housing Grant.

The PHG grant is to help Singaporeans buy a resale flat, with or near their parents or married child.

Starting immediately, eligible Singaporeans will receive a Proximity Housing Grant (PHG) of S$20,000; eligible singles will get a Proximity Housing Grant (PHG) of S$10,000 if they buy a resale flat with their parents.

Good things about this grant –

All Singaporeans are eligible for it once in their lifetime – whether they have enjoyed housing subsidies before ( those whom get higher tie HDB grant before are also eligible YEAH ), regardless what their household income is or whether they own private property

This PHG grant has NO income ceiling

HDB Proximity Housing Grant (PHG)

Higher Income Ceilings

Also announced in the same press release are changes to the income ceilings for citizen households buying HDB flats (new and resale) and Executive Condominiums (new). The new ceilings are respectively: $12k for HDB flats and $14k for ECs. This means more people are now eligible to buy these HDB housing units. It shows that MND and HDB are committed to helping Singaporeans own a flat, particularly young couples setting up their first homes.

A 4,133 sq ft penthouse with unblocked sea views located at luxury condominium Seascape was sold for $5.8 million in May , which translates into aprofit, loss of $5.2 million or a 47.3% plunge for the original owner who paid $11 million for the unit in December 2011, according to a caveat lodged then. The latest sale price of $5.8 million works out to $1,403 psf, based on the latest caveat.

The penthouse with four bedrooms and a study is located on the eighth floor of the 151-unit condo, which was completed in 2011 and developed jointly by Ho Bee Land and IOI Properties. The penthouse was a mortgagee sale, and was first put up for auction by JLL on March 26 with an opening price of $9 million. It was put up for auction a second time in April at a lower opening price of $8.25 million, but still drew no bids. It was subsequently sold in a private treaty deal brokered by JLL in May.

At $1,400 psf, it appears that Sentosa Cove prices are returning to levels unseen since 2006. And that presents the kind of buying opportunities investors are seeking.

Recently, a 2,626 sq ft unit on the fifth level of The Coast changed hands for $4.18 million ($1,592 psf), according to a caveat lodged on June 19. The unit last transacted for $4.44 million ($1,690 psf) in December 2006.

Another unit on the third level of The Coast was recently sold for $1,420 psf, although the caveat has yet to be lodged. Bruce Lye, managing partner of SRI5000, a division of SLP International, was interested in buying it for himself, but missed out on the opportunity as the unit had already been snapped up.

“I think prices have bottomed,” says Lye. “There are many buyers who feel the same way, and willing to bite at the $1,400 to $1,500 psf level.”

Meanwhile, another unit at The Coast is available at an asking price of $1,450 psf. However, given that it is on the second level, the sea view is partially blocked by trees. “Many owners’ asking prices are now in the $1,400 to $1,450 psf range,” says an agent who is marketing several units within condo development. The Coast was developed Ho Bee Land and completed in 2009. Almost the 249 units in the luxury 99-year leasehold condo have a direct view of the sea from the living room and master bedroom.

At Turquoise, a unit on the fifth level is on the market for sale on a private treaty basis. The indicative price for the 2,185 sq ft three-bedroom unit said to be $3.17 million or about $1,450 psf.

The last transaction at Turquoise was for a 2,777 sq ft, four-bedroom unit on the same level that had changed hands for $4.55 million ($1,638 psf) in January this year. Prior to that, two identical four-bedroom units of 2,777 sq ft stacked on top of each other on the second and third levels were sold for $4.03 million ($1,450 psf) and $3.88 million ($1,397 psf) respectively in July 2014. Both were foreclosed properties and mortgagee sales. Turquoise, a 99-year leasehold luxury condo with 91 units, was developed by Ho Bee Land and completed just five years ago.

Meanwhile, at The Oceanfront, a landmark luxury condo at the mouth of the marina at Sentosa Cove, a 1,216 sq ft unit on the second level of one of the blocks was sold for $1.85 million ($1,521 psf) in May. It had fetched $1.59 million ($1,307 psf) when the 264-unit project was launched by City Developments and TID Pte Ltd in mid-2006.

On July 2, it was reported in the Straits Times that City Harvest Church founder has put his 5,242 sq ft duplex penthouse at The Oceanfront for sale at a price tag of $10 million.

At the 200-unit The Berth by the Cove, three transactions have been recorded this year to date. They ranged from $1,230 to $1,383 psf, far below the peak of $2,200 psf last seen in November 2007. The Berth was the first condo project to be launched in Sentosa Cove by developer Ho Bee in 2004; it was also the first to be completed, in late 2006, and it’s already nine years old.

The most recent transaction at The Berth was for the resale of a 2,002 sq ft unit on the first level, that fetched $2.52 million ($1,259 psf), according to a caveat lodged in May with URA Realis. The unit changed hands for $2.98 million ($1,488 psf) in March 2010. It was purchased for just $1.53 million ($766 psf) when the project was first launched in December 2004.

Another luxury condo at Sentosa Cove that had everyone riveted at the start of the year was The Marina Collection, when it was reported that 37 of 38 units sold had defaulted on their mortgages from United Overseas Bank.

Some buyers had been hoping that these units would appear as mortgagee sales at upcoming auctions. “There’s not going to be a ‘Great Singapore Sale’ for now,” says Joy Tan, head of auction at DTZ. “The bank will explore leasing out the units until the market recovers.”

Nevertheless, SRI5000’s Lye feels Sentosa Cove is worth revisiting at the current price levels of $1,400 to $1,500 psf as there is no new supply in the pipeline in Singapore’s premier waterfront residential enclave. “Once the government removes or revises the property cooling measures, prices at Sentosa Cove will be the first to react,” he says. “This is the opportunity many buyers have been waiting for.”

This article appeared in the City & Country of Issue 684 (July 6) of The Edge Singapore.

Property developers and homeowners hoping that the cooling measures will be relaxed soon will have to wait longer after the Monetary Authority of Singapore (MAS) said it is still premature to ease the policies, reported Today Online.

“Property prices have softened somewhat, but like I said last year, in the context of the price increase that had occurred — 60 percent over three years — the softening we have seen is really not all that much. So, it’s still premature to consider removing any of the cooling measures that are in place,” explained MAS managing director Ravi Menon at a media briefing on Tuesday.

Private home prices started climbing steeply in mid-2009 before peaking in Q3 2013. The introduction of the Total Debt Servicing Ratio (TDSR) framework in June 2013 saw the market gradually decline.

Based on flash estimates by the Urban Redevelopment Authority (URA), prices of private units dipped 0.9 percent in Q2, or the seventh consecutive quarter of price falls since the 2013 peak. However, prices corrected by less than seven percent from their record high.

“It is fair from the point of view of a policy stance aimed at re-engineering home affordability. The property market cooling is happening in an orderly fashion, and it is prudent to allow this to continue,” said Barclays economist Leong Wai Ho.

“Based on the still-strong reaction from developers to Government Land Sale tenders and the decent response to some of the new launches, this is probably not the correct time to be easing curbs,” he noted.

Menon’s views mirror that of Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam and National Development Minister Khaw Boon Wan.

Last October, Mr Tharman stated that “prices have some distance to go in achieving a meaningful correction”, while Mr Khaw mentioned it was not the right time to ease the cooling measures since there is still room for property prices to moderate.